Don't let it get away!

This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, fat and happy after their Christmas dinners, it appears Wall Street analysts are in a lazy and mostly positive mood. In all the investing universe, there seem to be only three ratings tweaks of any moment. And here they are:

Eagle Rock -- caged no moreWe begin with Eagle Rock Energy (NASDAQ: EROC) , our only true "upgrade" of the day. Houston-based Eagle Rock is primarily a storer, processor, and transporter of natural gas liquids, with an adjacent oil production business. Until Tuesday, the stock had been rated an underperform by investment banker Raymond James -- and rightly so. The stock has lost 25% of its value over the past year, while the S&P 500 gained 29%. But today, Raymond relented and upgraded the shares to market perform.

Why? Well, you can read the whole story in my Foolish colleague Matt DiLallo's column here. But the upshot is that Eagle Rock is selling its nat-gas business to Regency Energy Partners (NYSE: RGP) for about $1.3 billion in total compensation, and will double down on hydrocarbons production.

Matt thinks this is a good deal for Eagle Rock, which will be left as a pure-play exploration and production oil company with "proved reserves totaling 350 billion cubic feet equivalent in Texas, the Mid-Continent and the Gulf Coast." Thanks to the infusion of cash from Regency, it will have a "significantly" improved balance sheet as well.

Personally, though, I look at the company and the 6.1% operating profit margin it earned from its upstream oil business last year, and wonder if what remains of Eagle Rock after the transformation is really a business worth owning. Rival Linn Energy, for example, sports an operating profit margin several times as big as what Eagle Rock earned last year. While I agree that a debt-free Eagle Rock is a more attractive prospect than an Eagle Rock burdened by $1.2 billion in debt, and that for this reason if no other, Raymond James is right to upgrade it, I'm still not convinced that this Eagle will soar.

Heritage-Crystal's future looks clearerNext up, we find the analysts at Wunderlich upping their price target on buy-rated Heritage-Crystal Clean (NASDAQ: HCCI) . The waste management company sells for only a little above $20 today, so the potential for a 25% bump in share price should be good news for shareholders -- yet investors are instead bidding the shares down today. Why?

Perhaps the answer is as simple as this: Heritage shares are not cheap. Not by a long shot. With the company barely profitable, stock trades for the nosebleed P/E ratio of 236. It's even less attractive when valued on free cash flow, which has remained negative for four years running. With no free cash coming in the door, Heritage pays its shareholders no dividend.

By my count, that's strike one, two, and three -- and Wunderlich has struck out on this one.

Has FedEx finally arrived?Last in line, today's news is dominated by stories about how parcel posters FedEx (NYSE: FDX) and UPS (NYSE: UPS) flubbed the Christmas delivery season, missing deadlines and delivering thousands of packages late. That sounds like bad news, but this morning analysts at Argus Research are taking the opposite view and raising their price target for FedEx by a whopping 42%, to $173 per share.

Believe it or not, that actually makes some sense. After all, if FedEx failed to keep up with demand this just-past delivery season, then that must mean demand was pretty incredible. Revenue, and profit for FedEx, could be just as incredible when management gets around to reporting earnings in March. This suggests that other analysts, who are predicting only 12.5% earnings growth this year, and 15.5% long term, could be surprised by how well FedEx actually does.

Even so, I'm not buying the shares -- once again, because of the valuation. At 27.6 times earnings, FedEx would have to grow a whole lot faster than just 15.5% annually over the next five years to justify its valuation on a P/E basis. Even if Argus is right, and near-term estimates are wrong, I don't see the company outgrowing estimates by more than 10 percentage points -- which is what I'd need to see to make the shares look "buyable."

Meanwhile, my concerns about FedEx's subpar rates of converting generally accepted accounting principles "income" into real free cash flow remain intact. Over the past 12 months, FCF of $1.4 billion has lagged reported income by 15%. While the discrepancy between the two numbers is less than it's been in years past, and does appear to be closing slowly, earnings quality remains a concern. And so I must disagree with this ratings move as well. While FedEx remains a great business, its stock is still too expensive to buy.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends FedEx and United Parcel Service.

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As a defense writer for The Motley Fool, I focus on defense and aerospace stocks. My job? Every day of the week, I'm monitoring the news, figuring out the winners and losers, and tracking down the promising companies for you to invest in. Follow me on Twitter or Facebook for the most important developments in defense & aerospace, and other great stories.
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